FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2025

NOTE 9.

FAIR VALUE MEASUREMENTS

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).

The following table presents information about the Company’s assets and liabilities that are measured at fair value at June 30, 2025 and December 31, 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:


Description	Level	June 30, 2025		December 31, 2024
Assets:
Cash and Investments held in the Trust Account	1	$	31,688,265	$	83,293,711

Liabilities:
Convertible promissory notes - related parties	3	$	14,809,371	$	13,697,950

Warrant liability - Private Placement Warrants	2		561,400		3,920,000
Warrant liability - Public Warrants	1		601,500		4,200,000
Forward Purchase Agreement	3		13,131,327		7,978,952
Total liabilities		$	29,103,598	$	29,796,902

The Convertible promissory notes - related parties, the Public Warrants, the Private Placement Warrants and the Forward Purchase Agreement were accounted for as liabilities in accordance with ASC 815-40 and are presented within convertible notes and derivative liabilities on the balance sheets. The convertible notes are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of convertible notes - related parties in the statements of operations. The warrant liabilities and Forward Purchase Agreement are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of derivative liabilities in the statements of operations.

Upon initial issuance of each convertible note, the Company used a modified Black Scholes model to value the Convertible Note. As of June 30, 2025 and December 31, 2024, the Convertible Notes were classified as Level 3 on the Fair Value Hierarchy.

Upon initial issuance, the Public Warrants and the Private Placement Warrants used the Monte Carlo simulation model and the modified Black-Scholes model, respectively The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one Class A ordinary share and one-half of one Public Warrant), (ii) the sale of Private Warrants, and (iii) the issuance of Class B ordinary shares, first to the warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A ordinary shares subject to possible redemption (temporary equity) and Class B ordinary shares (permanent equity) based on their relative fair values at the initial measurement date. As of June 30, 2025 and December 31, 2024, the Public and Private Warrants were valued using the publicly available price for the Warrant and are classified as Level 1 and Level 2, respectively, on the Fair Value Hierarchy.

The Forward Purchase Agreement was valued using a valuation method which considers the reconstructed unit price (the total fair value of ordinary shares and half the Private Warrant value) and multiple assumptions such as risk-free rate and time to Initial Business Combination. As of June 30, 2025, the Forward Purchase Agreement was classified within Level 3 of the Fair Value Hierarchy at the measurement dates due to the use of unobservable inputs.

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2025 and 2024:


	Fair Value Measurement Using Level 3 Inputs Total
Balance, January 1, 2025	$	21,676,902
Issuance of convertible promissory notes - related parties		627,773
Proceeds in excess of fair value		(40,810	)
Change in fair value of convertible promissory notes - related parties		3,887
Change in fair value of forward purchase agreement		(7,978,952	)
Balance, March 31, 2025	$	14,288,800
Issuance of convertible promissory notes - related parties		712,592
Proceeds in excess of fair value		(48,409	)
Change in fair value of convertible promissory notes - related parties		(143,612	)
Change in fair value of forward purchase agreement		13,131,327
Balance, June 30, 2025	$	27,940,698

	Fair Value Measurement Using Level 3 Inputs Total
Balance, January 1, 2024	$	10,568,423
Issuance of convertible promissory note - related party		1,850,000
Proceeds in excess of fair value		(415,368	)
Change in fair value of convertible promissory note - related party		6,858
Change in fair value of forward purchase agreement		822,136
Balance, March 31, 2024	$	12,832,049
Issuance of convertible promissory note - related party		1,900,000
Proceeds in excess of fair value		(415,238	)
Change in fair value of convertible promissory note - related party		32,660
Change in fair value of forward purchase agreement		640,211
Balance, June 30, 2024	$	14,989,682

The key inputs into the discount model for the Convertible Promissory Notes were as follows:


	June 30, 2025			December 31, 2024
Volatility		253.0 – 505.9	%		192.9 – 193.8	%
Risk-free interest rate		4.29	%		4.31	%
Expected life of convertible promissory note		0.25 years			0.10 years
Dividend yield		0	%		0	%
Probability of business combination		95.0	%		95.0	%

The key inputs into the discount model for the Forward Purchase Agreement were as follows:


	June 30, 2025			December 31, 2024
Risk-free interest rate		4.29	%		4.31	%
Expected life of forward purchase agreement		0.25 years			0.09 years
Dividend yield		0	%		0	%
Probability of business combination		95.0	%		95.0	%

The following table provides a summary of the changes in the fair value of the Company’s financial instruments that are measured at fair value on a recurring basis:


	Convertible Promissory Notes			Private Placement Warrants			Public Warrants			Forward Purchase Agreement			Total
Fair value at December 31, 2024	$	13,697,950		$	3,920,000		$	4,200,000		$	7,978,952		$	29,796,902
Proceeds received from issuance of convertible notes		627,773			-			-			-			627,773
Proceeds in excess of fair value		(40,810	)		-			-			-			(40,810	)
Change in fair value		3,887			(840,000	)		(900,000	)		(7,978,952	)		(9,715,065	)
Fair value at March 31, 2025	$	14,288,800		$	3,080,000		$	3,300,000		$	-		$	20,668,800
Proceeds received from issuance of convertible notes		712,592			-			-			-			712,592
Proceeds in excess of fair value		(48,409	)		-			-			-			(48,409	)
Change in fair value		(143,612	)		(2,518,600	)		(2,698,500	)		13,131,327			7,770,615
Fair value at June 30, 2025	$	14,809,371		$	561,400		$	601,500		$	13,131,327		$	29,103,598

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details

Rigel Resource Acquisition Corp. 10-Q